Sutherland represents insurance and other financial services companies in a wide variety of financing transactions. These transactions raise capital by issuing registered and unregistered securities in the domestic and offshore markets. Our multi-disciplinary approach, employing our expertise in finance, insurance, securities (including the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940), commodities, tax (domestic and international) and accounting, is essential to our ability to effectively represent clients in these transactions.
Regulation XXX/AG 38
We have extensive experience representing life insurance companies in evaluating and implementing strategies to mitigate reserve strains arising from Regulation XXX and AG 38. Our completed and ongoing transactions include both short-term and long-term reinsurance letters of credit, surplus note issuances and synthetic structures. We also have advised on the regulatory, tax and other legal implications of onshore and offshore securitization structures and other capital market solutions.
Our experience in issuing surplus notes includes representation of both mutual and stock insurance companies. These long-term, subordinated debt securities are issued to strengthen an insurer’s capital structure. The notes require pre-approval of payments by the state regulator and are typically sold to institutional investors pursuant to offerings that comply with Securities and Exchange Commission Rule 144A. For many mutual insurers, the issuance of these notes is their first foray into the securities markets, and we have extensive experience in preparing the disclosure documents that meet the requirements of securities law.
Swaps and Derivatives
We are particularly well versed in the use of derivatives by insurance companies. Insurers have dramatically increased their use of a wide variety of derivative instruments to better manage financial risks inherent in their corporate structure and in the insurance products they offer. While insurers have long utilized interest rate and currency derivatives to address risk in their corporate balance sheets, more recently, the growth of new insurance products linked to equity performance and the growth in the credit default swap market has resulted in a greatly expanded use of these products to hedge financial risk and replicate exposure to financial assets. The traditional state regulation of insurance poses unique issues for insurers with respect to their use of derivatives and the negotiation of appropriate derivatives documentation.
Securities Backed by Funding Agreements
We represent life insurance companies in the issuance of securities backed by funding agreements and other forms of guaranteed investment contracts. Through these transactions, our insurance company clients gain access to domestic and offshore capital markets based on their financial strength rating rather than their general debt rating. Most of these transactions involve the creation of medium-term note programs designed to achieve flexible debt terms and to minimize periodic issuance costs.
Our experience in establishing vehicles and representing issuers domiciled outside of the United States, includes those established in Ireland, Bermuda, the Cayman Islands and the Isle of Man. In addition to our depth of experience in international tax and cross-border securities, we have established relationships with leading law firms in these countries that allow us to provide comprehensive advice to our clients.
Commercial Paper Programs
A number of our financial services holding company clients recently have established or expanded their commercial paper programs, including programs that utilize securitization vehicles. We assist these clients in negotiating dealer agreements and issuing agreements and in preparing disclosure materials.
We have advised insurers and underwriters in connection with complex and novel structured finance transactions in which insurance backs, enhances or provides an initial source of payment for the obligations issued in these transactions. Issuers, insurers, underwriters and other participants often call on us to evaluate these transactions under relevant insurance, securities and tax laws.
Unsecured Notes and General Debt Obligations
Our experience in representing issuers in public and private debt offerings is extensive. In addition to advising issuers in connection with SEC-registered debt offerings, we regularly provide advice in connection with private placements and offerings outside of the United States that satisfy the requirements of SEC Regulations D and S and exemptions under the Investment Company Act. While we advise on compliance with federal and state securities laws, we are particularly sensitive to the relevant insurance regulatory and tax issues faced by insurers in connection with their offerings.
We represent insurance companies and their investment management affiliates in the issuance of securities backed by mortgages, syndicated loans and corporate debt obligations. Most recently, we have worked with a number of our clients to evaluate existing and proposed structures in light of developing accounting rules, including FIN 46 and FAS 140.
Selected Insurance Finance Transactions
- Counsel to several life insurance companies in surplus notes offerings
- Counsel to various life insurance companies in derivatives activities for hedging, investment and replication purposes
- Counsel to life insurance company and its offshore reinsurance affiliate in a long-term letter of credit product to cover guaranteed elements of a defined block of guaranteed universal life business
- Counsel to life insurance companies, financing sources and investment banks in myriad premium financing transactions
- Counsel to various insurance companies and intermediaries in establishing offshore insurance investment products, including segregated accounts and cell companies
- Counsel to life insurance holding company in syndicated and bilateral letter of credit facilities to support the Regulation XXX/AG 38 activities of its reinsurance subsidiaries
- Counsel to life insurance company in analyzing tax issues arising from the establishment of an onshore captive reinsurer in connection with a Regulation XXX/AG 38 reserve securitization
- Counsel to life insurance companies as annuity providers in separate life insurance and annuity backed securities offerings
- Counsel to life insurance company in medium-term note program backed by general account funding agreement
- Counsel to specialty finance company in purchase of agents’ renewal commissions from life insurance company
- Counsel to life insurance company in developing a reinsurance structure to support its placement of primarily fixed rate funding agreements
- Counsel to Wilton Re in its acquisition (via reinsurance) of substantially all of the reinsurance business of Annuity and Life Re
- Reinsurance counsel to Allmerica Financial Corporation in the sale of its run-off variable life insurance and variable annuity business to The Goldman Sachs Group, Inc.
- Counsel to ING in the sale of its individual life reinsurance business to Scottish Re
- Counsel to Swiss Re in its reinsurance of CNA’s individual life insurance business
- Counsel to Lincoln National in the sale of its reinsurance business to Swiss Re
- Counsel to Lincoln National in its acquisition (via reinsurance) of Aetna’s individual life insurance business
- Counsel to Lincoln National in its acquisition (largely through reinsurance) of CIGNA’s individual life insurance and annuity business
- Counsel to life insurance company in syndicated senior credit facility
© 2013 Sutherland Asbill & Brennan LLP